Las Vegas is a better bet as Macau’s gaming revenue plummets

0

The resumption of casino gambling in Macau always seems to be near, but it never quite happens. Another fall in monthly gaming revenue in October shows the rebound is still on the horizon and making Las Vegas casinos the best bet.

For resort operators like Sands of Las Vegas (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) who get most or most of their money from the Chinese enclave, the losing streak is going to hurt for some time to come.

In contrast, the likes of MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR), which is primarily dependent on Las Vegas and other major regional gambling markets in the United States, should be where investors put their money.

Image source: Getty Images.

Macau is not the favorite

Gross gaming revenue (GGR) reported by Macau last month fell to just 4.3 billion patacas, which is the local currency and is equivalent to around $ 544 million, a 40% drop from the previous month. last year and nearly 26% below what the city took in the month before.

It’s the only place it’s legal to gamble in China, and Beijing is suspicious of the money coming in and out of casinos. Over the years, it has imposed increasingly stringent regulations on casinos, gamers, and junket operators who transport VIPs to and from the peninsula while lending them money to gamble.

The pandemic has exacerbated the situation as virtually all trips to the city have been closed. And outbreaks of COVID-19 variants have led neighboring provinces, where most travel to Macau originates, to restrict travel again.

Las Vegas Sands has sold off all of its US-based properties to go all out into Asian markets, which at this point are essentially just Macau. It reported third-quarter revenue of $ 857 million last month. While that’s nearly double the $ 446 million it cashed in for the same period in 2020, it is still well below the $ 3.2 billion it generated in 2019.

Likewise, Wynn Resorts just reported third-quarter revenue of $ 995 million, and while that is lower than the $ 1.6 billion achieved two years ago, it’s not nearly as bad. than what Sands experienced from Wynn’s Las Vegas operations, which accounted for almost half of revenue this quarter. . Macau typically accounts for two-thirds to three-quarters of Wynn’s net income.

Macau Gaming Monthly Revenue Table

Data source: Macau Gaming Inspection and Coordination Office. Chart by author.

Long live Las Vegas!

In contrast, casino operators with a greater presence in the United States are experiencing a rebound. MGM Resorts saw revenue increase 140% year-over-year to $ 2.7 billion in the last quarter, just 18% below 2019’s total of $ 3.3 billion But more importantly, its Las Vegas adjusted real estate EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent charges) was 21% higher than two years ago, and the EBITDAR of regional casinos was 29% higher.

And Caesars made $ 2.7 billion in the third quarter compared to $ 1.4 billion last year (as it merged with Eldorado Resorts in July 2020, there is no comparison to 2019).

In short, Las Vegas and various regional markets have removed most of the restrictions on casinos, such as mask warrants and capacity restrictions, leading players to return to the resorts. And as vaccinations proliferate, even with the potential need for reminders to follow, consumers are more comfortable finding themselves in large, crowded places again.

Couple playing craps at the casino

Image source: Getty Images.

Don’t double up on Macau

Macau was once the largest gaming market in the world, and it could eventually regain that status. Still, with the possibility of Japan opening its doors to casinos in the next few years, as well as Singapore and other Asian markets expanding their own gambling opportunities, high rollers might find these other sites more appealing because they won’t be. under the microscope of the Macau government faces.

For investors looking for the best casino growth stocks, MGM Resorts or Caesars seem to be winning hands, as do regional players like Boyd Gaming Where Penn National Gaming.

The odds are against resort operators who have made China their home, even figuratively, and should probably be avoided.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

Share.

Comments are closed.